* Gains capped by Vanguard group's switch to FTSE index
* Woori Finance up 3.8 pct on renewed privatisation hopes
By Joyce Lee
SEOUL, Jan 18 South Korean shares rose on Friday as positive sentiment flowing from strong U.S. data overnight was cemented by fourth-quarter GDP data from China showing its economy regained speed in the final quarter of 2012.
The Korea Composite Stock Price Index (KOSPI) gained 0.69 percent to close at 1,987.85 points, snapping a three-session losing streak to pare the week's loss to 0.4 percent.
"The main board did not rise as much as Asian peers, as the index remained capped by the Vanguard issue and local institutional investors net sold shares," said Lee Sun-yup, an analyst at Shinhan Investment Corp.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.78 percent, outperforming Seoul shares.
The KOSPI is seen weighed down by U.S. fund manager Vanguard group's decision to switch from the MSCI index to the FTSE to track emerging markets.
The move, which took effect last week, is expected to wipe about 9 trillion won ($8.5 billion) from Seoul stocks by July, as the new FTSE index on Vanguard's $67 billion emerging market fund does not include South Korea.
Blue-chips were mostly up, with tech heavyweight Samsung Electronics Co Ltd closing 0.8 percent higher to snap a three-session losing streak.
Financial shares were up across the board, improving the previous session's gains despite weak earnings results from Bank of America and Citigroup on Thursday.
In particular, state-owned Woori Finance Holdings Co Ltd and affiliate Woori Investment & Securities closed up 3.8 percent and 5.7 percent respectively on renewed hopes for Woori's privatisation.
Officials in the incoming Park Geun-hye administration were briefed this week by South Korean regulatory officials concerning recommendations on privatizing Woori, a source with direct knowledge of the briefing told Reuters.
South Korea's effort to sell the banking group has been halted three times due to lack of interest.
Among daily movers, fluorescent lighting manufacturer Kumho Electric Inc rose 8.8 percent.
"New regulations limiting the sales of a widely-used standard in incandescent light bulbs in the U.S. effective this January is expected to increase demand for light-emitting diode (LED) lighting," said Ji Mok-hyun, an analyst at Meritz Securities.
Foreign investors purchased a net 32.1 billion won ($30.3 million) worth of KOSPI shares, boosting the index. Advancing shares outnumbered decliners 546 to 243.
The KOSPI 200 benchmark of core stocks rose 0.6 percent, while the junior KOSDAQ added 1.2 percent.
Move on day +0.69 percent
12-month high 2,057.28 14 March 2012
12-month low 1,769.31 25 July 2012
Change on yr -2.1 percent
All-time high 2,231.47 27 April 2011
All-time low 93.10 6 January 1981 ($1 = 1058.1500 Korean won) (Editing by Richard Pullin)